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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2005

Commission File Number: 0-23363

AMERICAN DENTAL PARTNERS, INC.

(Exact name of registrant as specified in its charter)

American Dental Partners, Inc.

201 Edgewater Drive, Suite 285

Wakefield, Massachusetts 01880

(Address of principal executive offices, including zip code)

(781) 224-0880

(781) 224-4216 (fax)

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  YES    ¨  NO

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act.)    x  YES    ¨  NO

The number of shares of Common Stock, $0.01 par value, outstanding as of May 5, 2005 was 7,967,054.

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AMERICAN DENTAL PARTNERS, INC.

INDEX

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AMERICAN DENTAL PARTNERS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

(unaudited)

See accompanying notes to interim consolidated financial statements.

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AMERICAN DENTAL PARTNERS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

(unaudited)

See accompanying notes to interim consolidated financial statements.

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AMERICAN DENTAL PARTNERS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

See accompanying notes to interim consolidated financial statements.

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AMERICAN DENTAL PARTNERS, INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(1) Description of Business

American Dental Partners, Inc. (the “Company”) is a leading provider of business services to multi-disciplinary dental group practices in selected markets throughout the United States. The Company acquires selected assets of the dental practices with which it affiliates and enters into long-term service agreements with the affiliated dental group practices or professional corporations (“PC”). The Company provides all services necessary for the administration of the non-clinical aspects of the dental operations. Services provided to the affiliated dental group practices include providing assistance with organizational planning and development; recruiting, retention and training programs; quality assurance initiatives; facilities development and management; employee benefits administration; procurement; information systems; marketing and payor relations; and financial planning, reporting and analysis. The Company operates in one segment.

(2) Basis of Presentation

The interim consolidated financial statements include the accounts of American Dental Partners, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

The Company does not own any interests in or absorb a majority of the economic risks and rewards of the affiliated dental group practices. Accordingly, the financial statements of the affiliated dental group practices are not consolidated with those of the Company.

The interim consolidated financial statements are unaudited, but in the opinion of management include all adjustments, which consist only of normal and recurring adjustments, necessary for a fair presentation of its financial position and results of operations. Results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Certain reclassifications have been made to 2004 interim consolidated financial statements to conform to current year presentation. These financial statements should be read in conjunction with the Company’s consolidated financial statements as of and for the year ended December 31, 2004 included in the Company’s Annual Report on Form 10-K.

(3) Goodwill and Intangible Assets

Intangible assets consisted of the following as of March 31, 2005 and December 31, 2004 (in thousands):

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AMERICAN DENTAL PARTNERS, INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Intangible amortization expense for the three months ended March 31, 2005 and 2004 was $1,209,000 and $1,082,000, respectively. Estimated amortization expense for each of the next five years ending March 31, 2006, 2007, 2008, 2009 and 2010 will be $4,923,998, $4,916,047, $4,911,547, $4,905,486 and $4,899,157, respectively.

Management performed its annual impairment test on goodwill as of December 31, 2004 in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets.” The Company would also perform an impairment test of goodwill on an interim basis if an event or circumstance indicates that it is more likely than not that an impairment loss has been incurred. The Company determines impairment by comparing the fair value to the carrying value of the reporting units. The Company determines the fair value of each reporting unit based on discounted future cash flows using a discount rate reflecting the Company’s average cost of funds. If impairment were determined, an appropriate adjustment to goodwill to reduce the asset’s carrying value would be made. The Company has not recorded any impairment charges on goodwill during the three months ended March 31, 2005.

Management performs an impairment test on definite-lived intangible assets when facts and circumstances exist which would suggest that the intangible assets may be impaired. The Company compares the estimated undiscounted net cash flows of the asset to the carrying value of the intangible asset when performing the impairment test on the intangible assets. If impairment was determined, an appropriate adjustment to the intangible asset would be made to reduce the asset’s carrying value to fair value. Fair value is determined by calculating the projected discounted operating net cash flows of the asset using a discount rate reflecting the Company’s average cost of funds. The Company has not recorded any impairment charges or write-downs on definite-lived intangibles during the three months ended March 31, 2005.

(4) Stock Option Plans

Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” as amended by SFAS No. 148 “Accounting for Stock-Based Compensation-Transition and Disclosure-an amendment to FASB Statement No. 123,” allows companies to recognize expense for the fair value of stock-based awards or to continue to apply the provisions of Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and disclose the effects of SFAS No. 123 as if the fair-value-based method defined in SFAS No. 123 had been applied. Under APB Opinion No. 25, compensation expense is recognized only if on the measurement date the fair value of the underlying stock exceeds the exercise price. The Company has elected to apply the provisions of APB Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No. 123 and No. 148.

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AMERICAN DENTAL PARTNERS, INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The following table shows the Company’s pro forma net earnings and earnings per share if the Company had accounted for stock options under SFAS No. 123 (in thousands, except per share amounts) for the three months ended March 31, 2005 and 2004:

(5) Net Revenue

The Company’s net revenue represents reimbursement of expenses and fees charged to affiliated dental group practices pursuant to the terms of the service agreements. Additionally, the Company’s net revenue includes amounts from dental benefit providers related to the arrangement of the provision of care to patients and dental laboratory services. Net revenue consisted of the following (in thousands):

Net revenue from the Company’s service agreements with Park Dental and Forward Dental Group (formerly known as Wisconsin Dental Group) represented approximately 31% and 13% of its consolidated net revenue for the three months ended March 31, 2005 and approximately 32% and 13% of its consolidated net revenue for the three months ended March 31, 2004, respectively. No other service agreement or customer accounted for 10% of consolidated net revenue.

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AMERICAN DENTAL PARTNERS, INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

(6) Earnings Per Share

Basic earnings per share is computed by dividing net earnings available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of common shares outstanding during the period plus the dilutive effect of outstanding stock options using the “treasury stock” method. The computation of diluted earnings per share does not include the effect of outstanding stock options that would be antidilutive.

The components of basic and diluted earnings per share computations for the three months ended March 31 are as follows (in thousands):

(7) Internal Use Software

Since 2002, the Company has been developing Improvis, a replacement system to Comdent, a proprietary practice management system which is currently used by many of the Company’s affiliated dental group practices. The first phase of development is expected to be completed in the second quarter of 2005. Pursuant to Statement of Position 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use,” the Company capitalized applicable costs beginning in 2003, with total capitalized costs through March 31, 2005 of $1,014,000. These costs will be amortized over ten years when the first phase is complete.

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AMERICAN DENTAL PARTNERS, INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

(8) Recent Accounting Pronouncements

In April 2005, the Securities and Exchange Commission announced the adoption of a new rule that amended the compliance date for FASB SFAS No. 123 (R), “Share-Based Payments”, which establishes standards for transactions in which an entity exchanges its equity instruments for goods or services. SFAS No. 123 (R) was to be effective for the interim or annual reporting periods beginning on or after June 15, 2005, but April’s announcement amends the effective date for implementing SFAS No. 123 (R) to the beginning of the next fiscal year that begins after June 15, 2005. The Company will continue to provide the pro forma disclosure provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” as amended by SFAS No. 148 “Accounting for Stock-Based Compensation-Transition and Disclosure-an amendment to FASB Statement No. 123” in the Notes to Interim Consolidated Financial Statements.

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AMERICAN DENTAL PARTNERS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(unaudited)

Cautionary Statement Regarding Forward-Looking Statements

Some of the information in this Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The words “believe,” “expect,” “anticipate,” “project,” and similar expressions, among others, identify forward-looking statements. Forward-looking statements speak only as of the date the statement was made. Such forward-looking statements are subject to risks and uncertainties and other factors that could cause actual results to differ materially from those projected, anticipated or implied. Certain factors that might cause such a difference include, among others, our risks associated with overall or regional economic conditions, its affiliated dental group practices contracts with third party payors and the impact of any terminations or potential terminations of such contracts, the cost of and access to capital, fluctuations in labor markets, our affiliation and acquisition strategy, management of rapid growth, dependence upon affiliated dental group practices, dependence upon service agreements and government regulation of the dental industry. Additional risks, uncertainties and other factors are set forth in Management’s Discussion and Analysis of Financial Condition and Results of Operations - “Risk Factors” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

Overview

American Dental Partners, Inc. (“ADPI”) is a leading provider of business services to multi-disciplinary dental group practices in selected markets throughout the United States. We are committed to the growth and success of our affiliated dental group practices, and we make substantial investments to support each affiliated dental group’s growth. We assist our affiliates with organizational planning and development; recruiting, retention and training programs; quality assurance initiatives; facilities development and management; employee benefits administration; procurement; information systems; marketing and payor relations; and financial planning, reporting and analysis. At March 31, 2005, we were affiliated with 19 dental group practices, comprising 411 dentists practicing in 181 locations in 18 states.

Affiliation and Acquisition Summary

When affiliating with a dental group, we acquire selected assets and enter into a long-term service agreement with the affiliated dental group practice or professional corporation (“PC”). Under our service agreements, we are responsible for providing all services necessary for the administration of the non-clinical aspects of the dental operations. The PC is responsible for the provision of dental care. Each of our service agreements is for an initial term of 40 years. We are constantly evaluating potential affiliations with dental group practices and acquisition of companies that would expand our business capabilities. The number of new affiliations and acquisitions over the next twelve months could be at levels greater or less than we have achieved during each of the past two years.

Revenue Overview

Our Net Revenue

Our net revenue comprises fees earned under service agreements from our affiliated dental group practices, fees received from dental benefit providers related to the arrangement of the provision of care to patients and dental laboratory fees.

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AMERICAN DENTAL PARTNERS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – (Continued)

(unaudited)

The following table sets forth for the three months ended March 31, 2005 and 2004 the components of net revenue in our consolidated statements of income (in thousands):

For additional information on components of our net revenue, see Note 5 of “Notes of Interim Consolidated Financial Statements.”

Adjusted Gross Revenue of the Affiliated Dental Group Practices

Although we do not own or control the affiliated dental group practices or PCs and, accordingly, do not consolidate the financial statements of the PCs with ours, we believe it is important to understand the revenue of the affiliated dental group practices. The affiliated dental group practices generate revenue from patients and dental benefit providers under fee-for-service, PPO plans and capitated managed care plans. The affiliated dental group practices record revenue at established rates reduced by contractual adjustments and allowances for doubtful accounts to arrive at adjusted gross revenue. Contractual adjustments represent the difference between gross billable charges at established rates and the portion of those charges reimbursed pursuant to certain dental benefit plan provider contracts. After collection of fees from patients and insurers for the provision of dental care and reimbursement of expenses and payment of fees to us, the amounts retained by the affiliated dental group practices are used for compensation of dentists and in certain states where the affiliated dental group practices must employ dental hygienists and/or dental assistants, compensation of such non-dentist employees. The following table sets forth for the three months ended March 31, 2005 and 2004 the amounts paid to us under our service agreements, the amounts retained by the affiliated dental group practices and the adjusted gross revenue generated by the affiliated dental group practices from patients and dental benefit providers (in thousands):

We have been made aware that certain members of PDG, P.A., the affiliated dental group practice of Park Dental, our Minnesota affiliate, have contacted one or more of our shareholders expressing concerns related to organizational issues and the fact that Park Dental’s 2005 operating plan, principally the funding of additional PDG, P.A. expenses, is not yet finalized. We are having ongoing discussions with these representatives and are working diligently to address these matters.

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AMERICAN DENTAL PARTNERS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – (Continued)

(unaudited)

While payor mix varies from market to market, the following table sets forth for the three months ended March 31, 2005 and 2004 the aggregate payor mix percentages of the affiliated dental group practices:

Results of Operations

Net Revenue

Net revenue increased 9.3% to $48,145,000 for the three months ended March 31, 2005 from $44,064,000 for the three months ended March 31, 2004. The increase was attributable to same market net revenue growth from our affiliated dental group practices which was 7% for the three months ended March 31, 2005, and incremental net revenue earned from our platform affiliation completed in February 2005, offset by a decrease in other revenue. The decrease in other revenue is primarily attributable to a decrease in dental laboratory fees as a result of an increasing percentage of fees being earned from our affiliated dental groups.

Net revenue from our service agreements with Park Dental and Forward Dental Group represented approximately 31% and 13% of our consolidated net revenue for the three months ended March 31, 2005 and approximately 32% and 13% of our consolidated net revenue for the three months ended March 31, 2004, respectively. No other service agreement or customer accounted for 10% of consolidated net revenue.

Although we do not own or control our affiliated dental group practices, we believe that it is more meaningful to analyze our revenue, expenses and margins in terms of total revenue, which includes the adjusted gross revenue of our affiliated dental group practices, the fees we receive from dental benefit providers related to the arrangement of the provision of care to patients and our dental laboratory fees. Total revenue and adjusted gross revenue are not measures of financial performance under GAAP, but our expenses and business services fees are incurred or earned in support of the adjusted gross revenue of our affiliated dental group practices. We use these and other non-GAAP financial measures to analyze operating trends and to help manage our business.

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AMERICAN DENTAL PARTNERS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – (Continued)

(unaudited)

The following table sets forth the three months ended March 31, 2005 and 2004 the components of total revenue, a reconciliation of total revenue to net revenue and the percentage of net revenue and total revenue for items in our consolidated statements of income (in thousands):

Total revenue increased 8.9% to $74,772,000 for the three months ended March 31, 2005 from $68,643,000 for the three months ended March 31, 2004. The increase was primarily the result of growth at our existing affiliated dental group practices along with incremental growth in adjusted gross revenue from our February 2005 platform affiliation. Same market affiliate adjusted gross revenue growth was 7.0% for the three months ended March 31, 2005. Same market affiliate adjusted gross revenue excludes affiliations that occurred after January 1, 2005. Other revenue, which includes fees received from dental benefit providers related to the arrangement of the provision of care to patients and dental laboratory fees, decreased 5.0% to $1,230,000 from $1,295,000 as a result of an increasing percentage of our laboratory fees being generated from our affiliated dental groups. For the three months ended March 31, 2005 and 2004, 69.0% and 58.6% of our laboratory fees were generated from our affiliated dental groups, respectively.

Amounts retained by affiliated dental group practices increased 8.3% to $26,627,000, for the three months ended March 31, 2005 from $24,579,000 for the three months ended March 31, 2004. As a percentage of adjusted gross revenue of our affiliated dental group practices, amounts retained by affiliated dental group practices decreased to 36.2% for the three months ended March 31, 2005 from 36.5% for the three months ended March 31, 2004. The decrease as a percentage of adjusted gross revenue is mainly attributable to lower profitability levels at the affiliated dental group practices offset by increases in doctor compensation and employment of dental hygienists and dental assistants at our February 2005 platform affiliation.

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AMERICAN DENTAL PARTNERS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – (Continued)

(unaudited)

The following table reconciles for the three months ended March 31, 2005 and 2004 same market affiliate adjusted gross revenue growth and amounts retained by affiliated dental group practices to our net revenue (in thousands):

Salaries and Benefits

Salaries and benefits expense includes costs for personnel working for us in the dental facilities, dental laboratories and local and regional management as well as certain contractual expenses related to the arrangement of the provision of care to patients. At the facility level, we generally employ the administrative staff and, where permitted by state law, the dental hygienists and dental assistants. The local and regional operating management teams supervise and support the staff at the dental facilities.

Salaries and benefits expense as a percentage of total revenue decreased to 27.3% for the three months ended March 31, 2005 from 28.1% for the three months ended March 31, 2004. The decrease was primarily a combination of the current year impact of entering into our February 2005 platform affiliation where the affiliated dental group practice is required to employ the dental hygienists and dental assistants and staff productivity increases at our existing affiliated dental groups.

Lab Fees and Dental Supplies

Lab fees and dental supplies expense varies from affiliate to affiliate and is affected by the volume and type of procedures performed. Lab fees and dental supplies expense as a percentage of total revenue decreased to 10.2% for the three months ended March 31, 2005 from 10.4% for the three months ended March 31, 2004. The decrease was primarily related to our continued focus on managing these expenses and increased utilization of our dental laboratory by our affiliated dental groups.

Office Occupancy Expenses

Office occupancy expenses include rent expense and certain other operating costs, such as utilities, associated with dental facilities, our dental laboratory and the local and regional administrative offices. Such costs vary based on the size of each facility and the market rental rate for dental office space in each particular geographic market.

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AMERICAN DENTAL PARTNERS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – (Continued)

(unaudited)

Office occupancy expense as a percentage of total revenue decreased to 7.4% for the three months ended March 31, 2005 from 7.5% for the three months ended March 31, 2004. The decrease was primarily attributable to higher utilization of our dental facilities as evidenced by a higher level of total revenue per facility compared to the prior year. During the three months ended March 31, 2005 and 2004, we relocated and/or expanded one and seven facilities, respectively.

We expect office occupancy expense in dollars to increase as we continue to invest in the relocation and expansion of dental facilities.

Other Operating Expenses

Other operating expenses include non-employment related insurance expense, professional fees, marketing costs and other general and administrative expenses. Other operating expenses as a percentage of total revenue remained at 6.1% for the three months ended March 31, 2005 and 2004.

General Corporate Expenses

General corporate expenses consist of compensation and travel expenses for our corporate personnel and administrative staff, facility and other administrative costs of our corporate office and professional fees, including legal and accounting. General corporate expenses as a percentage of total revenue increased to 3.5% for the three months ended March 31, 2005 from 2.8% for the three months ended March 31, 2004. The increase in general corporate expenses was primarily due to costs for compliance with Section 404 of the Sarbanes-Oxley Act of 2002, new hires at our corporate office, and increases in our incentive compensation plan.

Depreciation

Depreciation expense includes charges related to leasehold improvements and furniture, fixtures and equipment used to operate the dental facilities, lab facility, local and regional management offices and our corporate office. Depreciation expense as a percentage of total revenue increased to 2.2% for the three months ended March 31, 2005 from 2.1% for the three months ended March 31, 2004. The increase was the result of our February 2005 platform affiliation.

We expect to continue to invest in the development of new dental facilities and the relocation and/or expansion of existing dental facilities. Accordingly, depending on the amount and timing of such future capital expenditures, depreciation may increase at a rate greater than total revenue.

Amortization of Intangible Assets

Amortization expense as a percentage of total revenue remained at 1.6% for the three months ended March 31, 2005 and 2004. The increase in amortization expense associated with our February 2005 platform affiliation was offset by same market revenue growth of our existing affiliated dental group practices.

Amortization of intangible assets could increase in the future as a result of definite lived intangibles recorded in connection with future affiliations, acquisitions and existing affiliation contingent payments.

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AMERICAN DENTAL PARTNERS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – (Continued)

(unaudited)

Earnings from Operations

Earnings from operations increased 18.7% to $4,585,000, or 6.1% of total revenue, for the three months ended March 31, 2005 from $3,863,000, or 5.6% of total revenue, for the three months ended March 31, 2004. Earnings from operations as a percentage of total revenue increased primarily due to increased productivity and facility utilization as a result of higher same market growth rates and improvements in lab fees and dental supplies expenses.

Interest Expense

Net interest expense decreased to $430,000 for the three months ended March 31, 2005 from $465,000 for the three months ended March 31, 2004. The decrease was a result of lower debt levels offset by $47,000 of deferred financing costs written-off as a result of applying EITF 98-4, “Debtor’s Accounting for Changes in Line-of-Credit or Revolving Debt Arrangements,” related to the amendment to our credit facility in February 2005.

Income Taxes

Our effective tax rate was 39.6% for the three months ended March 31, 2005 and 39.3% for the three months ended March 31, 2004. We anticipate the annual effective tax rate for 2005 to be in the range of 39.5% to 40.5%.

Net Income

Net income increased 21.6% to $2,509,000, or 3.4% of total revenue, for the three months ended March 31, 2005, from $2,064,000, or 3.0% of total revenue, for the three months ended March 31, 2004. Net income as a percentage of total revenue increased primarily due to increased earnings from operations, as discussed above, and reduced borrowing costs.

Liquidity and Capital Resources

We have financed our operating and capital needs, including cash used for affiliations and acquisitions, capital expenditures and working capital, from sales of equity securities, borrowings under our revolving line of credit and cash generated from operations.

For the three months ended March 31, 2005 and 2004, cash provided by operating activities amounted to $4,566,000 and $6,674,000, respectively. For the three months ended March 31, 2005, cash from operations primarily resulted from net earnings after adding back non-cash items and increases in accounts payable, accrued expenses and income taxes payable, partially offset by an increase in receivables due from affiliated dental group practices and other current assets and a decrease in accrued compensation and benefits. The increase in receivables due from affiliated dental group practices, which totaled $2,652,000, was due to an increase in patient receivables balances in addition to several of our affiliated dental groups distributing their accumulated 2004 profits to their doctor partners at our affiliated dental group practices during the quarter. The days sales outstanding for the patient receivables of our affiliated dental group practices decreased to 33 days at March 31, 2005 from 35 days at March 31, 2004 and 34 days at December 31, 2004. For the three months ended March 31, 2004, cash from operations primarily resulted from net earnings after adding back non-cash items and increases in accounts payable and accrued expenses and income taxes payable, in addition to a decrease in receivables due from affiliated dental groups, partially offset by an increase in other current assets and a decrease in accrued compensation and benefits.

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AMERICAN DENTAL PARTNERS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – (Continued)

(unaudited)

For the three months ended March 31, 2005 and 2004, cash used for investing activities amounted to $5,638,000 and $1,798,000, respectively. Cash used for investing activities during the three months ended March 31, 2005 was primarily used for capital expenditures and payments made as part of affiliations, which were $1,670,000 and $3,968,000, respectively. Capital expenditures for the three months ended March 31, 2005 included costs associated with the relocation and/or expansion of one and seven dental facilities, respectively. Payments made as part of affiliations for the three months ended March 31, 2005 included costs associated with one platform affiliation, one in market affiliation and one earnout payment. Cash used for investing activities during the three months ended March 31, 2004 was primarily used for capital expenditures and payments made as part of affiliations and acquisitions, which were $1,253,000 and $560,000, respectively. We expect that capital expenditures for the remainder of 2005 to be higher than in past years due to the relocation and/or expansion of existing dental facilities, our on-going facility maintenance capital expenditure program and investment in several information technology projects.

For the three months ended March 31, 2005, cash generated from financing activities amounted to $2,229,000 as a result of an increase in indebtedness of $1,812,000 and proceeds from the issuance of Common Stock from stock option exercises and under our employee stock purchase plan of $381,000 and $162,000, respectively, off set by payments of debt issuance costs of $126,000 related to our amended credit facility. Cash used for financing activities for the three months ended March 31, 2004 amounted to $4,620,000 as a result of the repayment of indebtedness of $5,210,000, offset by proceeds from the issuance of Common Stock under our employee stock purchase plan and from stock option exercises of $488,000 and $115,000, respectively.

We have a $70,000,000 credit facility that is used for general corporate purposes, including working capital, affiliations, acquisitions and capital expenditures. On February 22, 2005, we amended our credit facility as a result of our improved financial position and to take advantage of favorable credit markets. The amended credit facility matures in February 2008 and the maximum principal amount is $70,000,000, which will be reduced to $65,000,000 in February 2007. Borrowings under the credit facility bear interest at either prime or LIBOR plus a margin, at our option. The margin is based upon our debt coverage ratio and ranges from 0.00% to 1.00% for prime borrowings and 1.00% to 2.00% for LIBOR borrowings. At March 31, 2005, the LIBOR interest rate under the credit facility was approximately 3.96% and the prime interest rate under the credit facility was 5.75%. In addition, we pay a commitment fee which ranges from 0.25% to 0.50% of the average daily balance of the unused line. Borrowings are limited to an availability formula based on earnings before income taxes, depreciation and amortization, adjusted for certain items. The credit facility is collateralized by a first lien on substantially all of our assets, including a pledge of the stock of our subsidiaries. We are also required to comply with financial and other covenants. The financial covenants include a minimum net worth, leverage and fixed charge coverage ratios and maximum capital expenditures as defined by the credit facility agreement. We were in compliance with our covenants as of March 31, 2005. The outstanding balance under this line as of March 31, 2005 was $29,900,000. The unused balance at March 31, 2005 was $40,100,000 and based on borrowing covenants $38,998,000 was available for borrowing.

Our growth to date has resulted in large measure from our ability to affiliate with additional dental practices. Historically, we have used a combination of cash, subordinated debt and common stock as consideration for past affiliations and acquisitions and plan to use these sources in the future. In recent years, the consideration paid has consisted of cash and subordinated debt. In the event that our common stock does not maintain sufficient valuation or if potential affiliation or acquisition candidates are unwilling to accept our common stock or subordinated debt as consideration, we will continue to use cash flow from operations and our revolving credit facility for future affiliations and acquisitions. In addition, if sufficient financing is not available as needed on terms acceptable to us, our affiliation and acquisition strategy will be modified. We are constantly evaluating potential affiliations with dental group practices and acquisition of companies that would expand our business capabilities. The number of new affiliations and acquisitions over the next twelve months could be at levels greater or less than we have achieved during each of the past two years.

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AMERICAN DENTAL PARTNERS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – (Continued)

(unaudited)

We believe that cash generated from operations and amounts available under our credit facility will be sufficient to fund our anticipated cash needs for working capital and capital expenditures for at least the next twelve months. Any excess cash will be used to reduce indebtedness or to repurchase Common Stock through our previously announced repurchase program, pursuant to which approximately $1,100,000 remains available to repurchase additional shares.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an on-going basis management evaluates its estimates, including those related to the carrying value of receivables due from affiliated dental group practices, goodwill, other intangible assets and insurance liabilities. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We have identified the policies below as critical to our business operations and the understanding of our results of operations.

Valuation of Receivables Due From Affiliated Dental Group Practices

The Company’s carrying amount of receivables due from affiliated dental group practices requires management to assess the collectibility of our business fees. Our fees are dependent on the economic viability of the affiliated dental group practices based on actual and expected future financial performance including collectibility of the affiliated dental group practices’ patient receivables, net of contractual adjustments and allowances for doubtful accounts.

The affiliated dental group practices record revenue at established rates reduced by contractual adjustments and allowances for doubtful accounts to arrive at adjusted gross revenue. Contractual adjustments represent the difference between gross billable charges at established rates and the portion of those charges reimbursed pursuant to certain dental benefit plan provider contracts. For contracts where there is no defined benefit, contractual adjustments are based upon historical collection experience and other relevant factors. The affiliated dental group practices’ provision for doubtful accounts is estimated in the period that services are rendered and adjusted in future periods as necessary. The estimates for the provision and related allowance are based on an evaluation of historical collection experience, the aging profile of the accounts receivable, write-off percentages and other relevant factors. Changes in these factors in future periods could result in increases or decreases in the provision. In the event that final reimbursement or bad debt experience differs from original estimates, adjustments to the affiliated dental group practices’ patient receivables would be required which may impact the collectibility of receivables due from affiliated dental group practices.

To date we have not recorded any losses related to our receivables due from affiliated dental group practices.

Goodwill and Other Intangible Assets

Our business acquisitions and affiliations typically result in goodwill and other intangible assets, which affect the amount of future period amortization expense and possible impairment expense that we may incur. The determination of the value of such goodwill and intangible assets requires management to make estimates and assumptions that affect our consolidated financial statements.

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AMERICAN DENTAL PARTNERS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – (Continued)

(unaudited)

As part of each affiliation and acquisition, we determine the amount of goodwill and intangible assets related to the transaction. In determining the amount of goodwill or intangible assets we estimate the fair value of the assets acquired and liabilities assumed. In determining fair value, we review the balance sheet of the acquired company to ensure the reasonableness of the balances, including the collectibility of receivables, value of inventory on hand, replacement value and depreciable lives of property and equipment and appropriate level of accrued liabilities. In determining the amount of intangible assets related to customer relationships as part of an acquisition, we estimate future discounted cash flows based on many factors, including historical and projected revenue streams and operating margins and customer attrition rates. If the facts and circumstances change indicating that the fair value of tangible net assets or intangible assets should change, future period results could be impacted.

For definite-lived intangible assets related to service agreements, we evaluate the amortization period based on the facts and circumstances of each individual affiliation. Our evaluation includes reviewing historical and projected operating results, dental benefit plan provider contracts, customer and patient stability and market presence in the geographic area that we are entering, along with other relevant factors. The initial amortization period for definite-lived intangibles is generally 15 to 25 years. If circumstances change, indicating a shorter estimated period of benefit, future amortization expense could increase.

We perform an impairment test on goodwill on an annual basis or on an interim basis if an event or circumstance indicates that it is more likely than not that an impairment loss has been incurred. We determine impairment by comparing the fair value to the carrying value of the reporting units. We determine the fair value of each reporting unit based on discounted future cash flows using a discount reflecting our average cost of funds. If impairment were determined, we would make the appropriate adjustment to goodwill to reduce the asset’s carrying value.

We perform an impairment test on definite-lived intangibles when facts and circumstances exist which would suggest that the intangibles may be impaired. We review the undiscounted net cash flows of the asset to the carrying value of the intangible asset and projected revenue streams when performing the impairment test on intangible assets. If impairment was determined, we would make the appropriate adjustment to the intangible assets to reduce the asset’s carrying value to fair value.

Insurance

We maintain various insurance coverages for our business, including property-casualty, business interruption, workers compensation and general liability, among others. In addition, our affiliated dental group practices are required to maintain, or cause to be maintained, professional liability insurance with us as a named insured. Several of these insurance programs have retention levels in which we are financially obligated for insured losses below certain financial thresholds before the insurer is financially obligated for insured losses. We maintain reserves for losses below retention levels for certain of these programs. Reserves are based upon estimates provided by third-party actuaries or by individual case-basis valuations. Changes in trends of loss severity or loss frequency may affect the calculation of these estimates and create the need for subsequent adjustments to estimated loss reserves.

Recent Accounting Pronouncements

In April 2005, the Securities and Exchange Commission announced the adoption of a new rule that amended the compliance date for FASB SFAS No. 123 (R), “Share-Based Payments”, which establishes standards for transactions in which an entity exchanges its equity instruments for goods or services. SFAS No. 123 (R) was to be effective for the interim or annual reporting periods beginning on or after June 15, 2005, but April’s announcement amends the effective date for implementing SFAS No. 123 (R) to the beginning of the next fiscal year that begins after June 15, 2005. The Company will continue to provide the pro forma disclosure provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” as amended by SFAS No. 148 “Accounting for Stock-Based Compensation-Transition and Disclosure-an amendment to FASB Statement No. 123” in the Notes to Interim Consolidated Financial Statements.

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AMERICAN DENTAL PARTNERS, INC.

PART I. FINANCIAL INFORMATION

(unaudited)

Item 3. Quantitative and Qualitative Disclosures About Market Risk

In the ordinary course of business, we are exposed to interest rate risk. With regard to our revolving credit facility, we are also exposed to variable rate interest for the banks’ applicable margins ranging from 1.00% to 2.00% based upon our debt coverage ratio. For fixed rate debt, interest rate changes affect the fair value but do not impact earnings or cash flow. Conversely, for floating rate debt, interest rate changes generally do not affect the fair market value but do impact future earnings and cash flow. We do not believe a one percentage point change in interest rates would have a material impact on the fair market value of our fixed rate debt. The pre-tax earnings and cash flow impact for one year based upon the amounts outstanding at March 31, 2005 under our variable rate revolving credit facility for each one percentage point change in interest rates would be approximately $299,000 per annum. We do not presently undertake any specific actions to cover our exposure to interest rate risk and we are not party to any interest rate risk management transactions.

Item 4. Controls and Procedures

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) as of March 31, 2005. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures timely alert them to material information relating to the Company required to be included in this report and were effective as of March 31, 2005.

As required by Rule 13a-15(d) under the Securities Exchange Act of 1934, the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the Company’s internal control over financial reporting to determine whether any changes occurred during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, there has been no such change during the quarter covered by this report.

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AMERICAN DENTAL PARTNERS, INC.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may be subject to litigation incidental to our business. We are not presently a party to any material litigation. Our affiliated PCs and the dentists and independent contractors employed or retained by them are from time to time subject to professional liability and other claims. Such claims, if successful, could result in damage awards exceeding applicable insurance coverage which could have a material adverse effect on our business, financial condition and results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

Exhibits (see exhibit index on page 24.)

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AMERICAN DENTAL PARTNERS, INC.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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AMERICAN DENTAL PARTNERS, INC.

EXHIBIT INDEX

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